Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘DeLong’

Artificial Intelligence and Artificial Problems

Posted by hkarner - 4. April 2017

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Rethinking Productivity Growth

Posted by hkarner - 4. März 2017

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Trading in Trump’s Lies

Posted by hkarner - 3. Februar 2017

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The Age of Incompetence

Posted by hkarner - 29. Dezember 2016

 

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Missing the Economic Big Picture

Posted by hkarner - 29. November 2016

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The Economic Trend Is Our Friend

Posted by hkarner - 1. September 2016

Photo of J. Bradford DeLong

J. Bradford DeLong

J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

AUG 31, 2016, Project Syndicate

BERKELEY – These are days of grave disillusionment with the state of the world. Sinister forces of fanatical, faith-based killing – something that we in the West, at least, thought had largely ended by 1750 – are back. And they have been joined by and are reinforcing forces of nationalism, bigotry, and racism that we thought had been largely left in the ruins of Berlin in 1945.

In addition, economic growth since 2008 has been profoundly disappointing. There is no reasoned case for optimistically expecting a turn for the better in the next five years or so. And the failure of global institutions to deliver ever-increasing prosperity has undermined the trust and confidence which in better times would serve to suppress the murderous demons of our age. Den Rest des Beitrags lesen »

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A Brief History of (In)equality

Posted by hkarner - 28. Juli 2016

Photo of J. Bradford DeLong

J. Bradford DeLong

J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

JUL 27, 2016, Project Syndicate

BERKELEY – The Berkeley economist Barry Eichengreen recently gave a talk in Lisbon about inequality that demonstrated one of the virtues of being a scholar of economic history. Eichengreen, like me, glories in the complexities of every situation, avoiding oversimplification in the pursuit of conceptual clarity. This disposition stays the impulse to try to explain more about the world than we can possibly know with one simple model.

For his part, with respect to inequality, Eichengreen has identified six first-order processes at work over the past 250 years.

The first is the widening of Britain’s income distribution between 1750 and 1850, as the gains from the British Industrial Revolution went to the urban and rural middle class, but not to the urban and rural poor.

Second, between 1750 and 1975, income distribution also widened globally, as some parts of the world realized gains from industrial and post-industrial technologies, while others did not. For example, in 1800, American purchasing power parity was twice that of China; by 1975 it was 30 times that of China.

The third process is what is known as the First Age of Globalization, between 1850 and 1914, when living standards and labor productivity levels converged in the global north. During this time, 50 million people left an overcrowded agricultural Europe for resource-rich new settlements. They brought their institutions, technologies, and capital with them, and the wage differential between Europe and these new economies shrank from roughly 100% to 25%.

This mostly coincided with the Gilded Age between 1870 and 1914, when domestic inequality rose in the global north as entrepreneurship, industrialization, and financial manipulation channeled new gains mostly to the wealthiest families.

Gilded Age inequality was significantly reversed during the period of social democracy in the global north, between 1930 and 1980, when higher taxes on the wealthy helped pay for new government benefits and programs. But the subsequent and last stage brings us to the current moment, when economic policy choices have again resulted in a widening of the distribution of gains in the global north, ushering in a new Gilded Age.

Eichengreen’s six processes affecting inequality are a good starting point. But I would go further and add six more.

First, there is the stubborn persistence of absolute poverty in some places, despite the extraordinary overall reduction since 1980. As the UCLA scholar Ananya Roy points out, people in absolute poverty are deprived of both the opportunities and the means to change their status. They lack what the philosopher Isaiah Berlin called “positive liberty” – empowerment for self-actualization – as well as “negative liberty,” or freedom from obstacles in one’s path of action. Seen in this light, inequality is an uneven distribution not only of wealth, but also of liberty.

Second is the abolition of slavery in many parts of the world during the nineteenth century, followed by, third, the global loosening over time of other caste constraints – race, ethnicity, gender – which deprived even some people with wealth of the opportunities to use it.

The fourth process consists of two recent high-growth generations in China and one high-growth generation in India, which has been a significant factor underlying global wealth convergence since 1975.

Fifth is the dynamic of compound interest, which through favorable political arrangements allows the wealthy to profit from the economy without actually creating any new wealth. As the French economist Thomas Piketty has observed, this process may have played some role in our past, and will surely play an even bigger role in our future.

At this point, it should be clear why I began by noting the complexity of economic history. This complexity implies that any adjustments to our political economy should be based on sound social science and directed by elected leaders who are genuinely acting in the interest of the people.

Emphasizing complexity brings me to a final factor affecting inequality – perhaps the most important of all: populist mobilizations. Democracies are prone to populist uprisings, especially when inequality is on the rise. But the track record of such uprisings should give us pause.

In France, populist mobilizations installed an emperor – Napoleon III, who led a coup in 1851 – and overthrew democratically elected governments during the Third Republic. In the United States, they underpinned discrimination against immigrants and sustained the Jim Crow era of legal racial segregation.

In Central Europe, populist mobilizations have driven imperial conquests under the banner of proletarian internationalism. In the Soviet Union, they helped Vladimir Lenin consolidate power, with disastrous consequences that were surpassed only by the horrors of Nazism, which also came to power on a populist wave.

Constructive populist responses to inequality are fewer, but they should certainly be mentioned. In some cases, populism has helped in extending the franchise; enacting a progressive income tax and social insurance; building physical and human capital; opening economies; prioritizing full employment; and encouraging migration.

History teaches us that these latter responses to inequality have made the world a better place. Unfortunately – and at the risk of oversimplification – we usually fail to heed history’s lessons.

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Krugman and DeLong Are Right, Eurotimidity Must Be Defeated. Here Is How

Posted by hkarner - 4. Juli 2016

By on July 1, 2016  RGE EconoMonitor

From Eurotimidity to Euroaudacity

A new proposal has come from a group of leading European economists (the Resiliency Authors) on how to shore up the Eurozone’s resiliency. Their recipe includes diversifying bank portfolios; decreasing banks’ overexposure to domestic loans; transferring the responsibility for banks’ rescue from national governments to the European Stability Mechanism (although the authors consider this option to be politically unfeasible); introducing fiscal expenditure rules (linking expenditure reduction to debt levels); strengthening the ESM, and making it more effective and better coordinated with the ECB; and further adjusting competitiveness with more structural reforms.

Would these measures improve the Eurozone resilience to future bad shocks?

Possibly.

Yet, is resilience the very first priority for the Eurozone at this point in time? Is it really what the Eurozone needs now? Den Rest des Beitrags lesen »

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Which Thinkers Will Define Our Future?

Posted by hkarner - 29. Juni 2016

Photo of J. Bradford DeLong

J. Bradford DeLong

J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

JUN 28, 2016, Project Syndicate

BERKELEY – Several years ago, it occurred to me that social scientists today are all standing on the shoulders of giants like Niccolo Machiavelli, John Locke, Adam Smith, Alexis de Tocqueville, Max Weber, and Émile Durkheim. One thing they all have in common is that their primary focus was on the social, political, and economic makeup of the Western European world between 1450 and 1900. Which is to say, they provide an intellectual toolkit for looking at, say, the Western world of 1840, but not necessarily the Western world of 2016. Den Rest des Beitrags lesen »

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Rescue Helicopters for Stranded Economies

Posted by hkarner - 1. Mai 2016

Photo of J. Bradford DeLong

J. Bradford DeLong

J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

APR 29, 2016, Project Syndicate

BERKELEY – For countries where nominal interest rates are at or near zero, fiscal stimulus should be a no-brainer. As long as the interest rate at which a government borrows is less than the sum of inflation, labor-force growth, and labor-productivity growth, the amortization cost of extra liabilities will be negative. Meanwhile, the upside of extra spending could be significant. The Keynesian fiscal multiplier for large industrial economies or for coordinated expansions is believed to be roughly two – meaning that an extra dollar of fiscal expansion would boost real GDP by about two dollars.

Some point to the risk that, once the economy recovers and interest rates rise, governments will fail to make the appropriate adjustments to fiscal policy. But this argument is specious. Governments that wish to pursue bad policies will do so no matter what decisions are made today. And to the extent that this risk exists at all, it is offset by the very tangible economic benefits of stimulus: improved labor-force skills, higher business investment, faster business-model development, and new, useful infrastructure. Den Rest des Beitrags lesen »

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